CASE: I Toyota
Of all the slogans kicked around Toyota, the key one is kaizen, which means “continuous improvement” in Japanese. While many other companies strive for dramatic breakthrough, Toyota overtook Ford Motor Company to become the second largest automaker in the world. Ford had been the second largest since 1931.
Toyota simply is tops in quality, production, and efficiency. From its factories pour a wide range of cars, built with unequaled precision. Toyota turns out luxury sedans with Mercedes-Benz-like quality using one-sixth the labor Mercedes does. The company originated just-in-time production and remains its leading practitioner. It has close relationships with its suppliers and rigid engineering specifications for the products it purchases
Toyota’s worldwide leadership in the automotive industry was built on its competitive advantage across the supply chain. Between 1990 and 1996, Toyota reduced part defects by 84 percent, compared to 47 percent for the Big 3. It also reduced the ratio of inventories to sales by 35 percent versus 6 percent. These reduction advantages occurred despite the fact the Big 3 relied on identical suppliers. A study by Jeff Dyer of The Wharton School of the University of Pennsylvania and Kentaro Nobeoka of Kobe University attributed Toyota’s success partly to its implementation of bilateral and multilateral, knowledge-sharing routines with suppliers that result in superior Interorganizational or network learning. Toyota uses six approaches to facilitate knowledge sharing: (1)a supplier association;(2) teams of consultants;(3)voluntary study groups;(4)problem-solving teams;(5)interfirm employee transfers; and (6)performance feedback and monitoring processes. This effort also involves intense levels of personal contact between Toyota and its suppliers.
Toyota pioneered quality circles, which involve workers in discussions of ways to improve their tasks and avoid what it calls the three Ds: the dangerous, dirty, and demanding aspects of factory work. The company has invested $770 million to improve worker housing, add dining halls, and build new recreational facilities. On the assembly line, quality is defined not as zero defects but, as another slogan puts it, “building the very best and giving the customer what she/he wants.” Because each worker serves as the customer for the process just before hers, she becomes a quality control inspector. If a piece isn’t installed properly when it reaches her, she won’t accept it.
Toyota’s engineering system allows it to take a new car design from concept to showroom in less than four years versus more than five years for U.S. companies and seven years for Mercedes. This cuts costs, allows quicker correction of mistakes and keeps Toyota better abreast of market trends. Gains from speed feed on themselves. Toyota can get its advanced engineering and design done sooner because, as one manager puts it, “We are closer to the customer and thus have shorter concept time.” New products are assigned to a chief engineer who has complete responsibility and authority for the product from design and manufacturing through marketing and has direct contacts with both dealers and consumers. New-model bosses for U.S. companies seldom have such control and almost never have direct contact with dealers or consumers.
The 1999 Harbour Report, a study of automaker competencies in assembly, stamping, and powertrain operations, stated that the top assembly facility in North America (based on assembly hours per vehicle) is Toyota’s plant in Cambridge, Ontario. In this plant, a Corolla is produced in 17.66 hours. Toyota was also rated number one in engine assembly, taking just 2.97 hours to produce an engine.
In Toyota’s manufacturing system, parts and cars don’t get build until orders come from dealers requesting them. In placing orders, dealers essentially reserve a portion of factory capacity. The system is so...